Global markets rally on positive earnings and China stimulus boost, tech stocks lead the way

Stocks experienced gains as investors rewarded companies for positive earnings updates and China’s latest economic stimulus elevated resource shares. The Stoxx 600 index in Europe rose by 0.8%, with mining stocks leading the surge following the People’s Bank of China’s announcement of a reserve requirement ratio cut for banks on Feb. 5. This decision is expected to enhance the economy by increasing liquidity for customer loans and bond purchases. In the U.S., equity futures rose, driven by tech stocks, following fresh closing highs on Wall Street. Asian stocks, particularly Chinese shares traded in Hong Kong, extended their rally after the stimulus news.

In terms of earnings, ASML Holding NV witnessed a significant increase as orders more than tripled in the last quarter, signaling a potential recovery in the semiconductor industry. SAP SE also experienced a boost after unveiling a restructuring plan, impacting around 8,000 jobs and emphasizing a greater focus on artificial intelligence, aiming to increase operating profit to approximately €10 billion next year.

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Upcoming U.S. earnings on Wednesday include Tesla Inc., International Business Machines Corp., AT&T Inc., and Abbott Laboratories. Netflix Inc. saw a rally in extended trading on Tuesday after reporting subscriber numbers that exceeded expectations.

The benchmark 10-year U.S. Treasury yield slightly decreased after a Tuesday increase. The dollar gauge retreated after two consecutive days of gains. In Japan, the 10-year sovereign yield briefly rose over 10 basis points following Governor Kazuo Ueda’s statement on the increased certainty of achieving the Bank of Japan’s price projections, leading to a decline in the Nikkei 225 index and strengthening of the yen against the dollar. Swap markets now indicate a 75% chance of a 25-basis-point rate increase by the BOJ in April, compared to 44% at the end of the previous week.

In the political arena, former President Donald Trump won the New Hampshire primary, dealing a blow to his major rival Nikki Haley, and solidifying his status as the likely Republican nominee. In Europe, German stocks and cyclical sectors tied to global trade, such as industrials, chemicals, and autos, appear vulnerable in the event of a Republican/Trump election victory, according to Goldman Sachs Group Inc. strategists. The vulnerability stems from higher risks related to potential tariff increases in Europe and a reduction in U.S. funding and support for Ukraine, as noted by a Goldman team led by Sharon Bell.

Elsewhere, Bitcoin rebounded after a two-day slump, and oil prices edged higher due to signs of lower U.S. inventories and tensions in the Middle East, though expectations for increased supplies balanced the outlook.